Brown blasts CBI over '£54bn rise' in tax take

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The Independent Online

The Chancellor Gordon Brown was embroiled in an unprecedented row last night with Britain's leading employers' organisation, the CBI, over claims that the business tax burden has risen by £54bn since Labour came to power.

A Treasury spokesman dismissed the CBI's claims as "misleading, double-counting and loose analysis" which "shortchanged" its members. "Their analysis is not going to win any Nobel prizes," he added.

The row highlights just how far relations between the CBI and the Government have deteriorated since Labour was elected in 1997. In its first term, Tony Blair's Government largely enjoyed the support of the big battalions of British industry represented by the CBI. But since Labour was re-elected in 2001, the atmosphere has grown increasingly hostile.

The CBI's analysis, prepared as a riposte to claims that business was "crying wolf" over increased taxation, calculates that by 2005/06, the annual tax bill faced by companies will be some £7.6bn higher than it was in 1997 - a cumulative increase of £54bn.

The CBI also argues that, contrary to Government claims, the business tax burden is not low in the UK compared with its international competitors. In fact, says the CBI, the UK's relative position is worsening with the main business taxes - corporation tax, national insurance contributions, business rates, and vehicle and fuel duties - accounting for 9.9 per cent of GDP. This compares with 7.3 per cent in the US and is also above the average of all Britain's main trading partners, says the CBI.

Digby Jones, the CBI's director general, said: "This report illustrates why so many business leaders are increasingly alarmed by the worsening situation and why the Government's indifference is so frustrating."

But the Treasury dismissed Mr Jones' assertions. It said the CBI's own report showed just as many businesses thought the UK's tax position was good as felt it was bad and that the single most important factor in deciding the location of investment was macro-economic policy.

The spokesman also said that, contrary to the CBI's press release, the actual report showed business tax as a proportion of GDP falling from 9.3 per cent in 1995 to 8.9 per cent, not 9.9 per cent. "Our business tax take is indeed lower than in France, Germany and the Netherlands and if the CBI took into account the costs of private health insurance falling on American businesses, their figure for the USA would probably be higher too," he added.

The Treasury also took the CBI to task over claims that reductions in corporation tax were "not on the agenda" in the UK when in fact it had been cut by £450m last year. Moreover, it said the CBI had used information selectively. The report showed, for instance, that the UK levied a higher rate of VAT on tourist accommodation but ignored the fact there was also a £20bn VAT saving in the UK because of goods and services which were zero-rated in the UK but not elsewhere.

"There are a lot of assertions in the CBI's press release which are not backed up by what is in the report and there is a lot in the report which is not backed up by what is happening in the real world," said the Treasury.

Last night a spokeswoman for Mr Jones said: "We stand by our report. The methodology we used was clear and fair. The objective was not to mislead anybody."